RBI Governor Sanjay Malhotra said the repo rate has been revised to 6.25 percent from 6.5 percent. The RBI has decided to cut the repo rate after 5 years. This will provide great relief to the homebuyers.
RBI Governor Sanjay Malhotra said the repo rate has been reduced from 6.5 percent to 6.25 percent. RBI has decided to reduce the repo rate after 5 years. This will be a big relief for homebuyers.
MUMBAI: The Reserve Bank of India (RBI) announced a cut in interest rates on February 7. RBI Governor Sanjay Malhotra said the repo rate has been revised to 6.25 percent from 6.5 percent. RBI has decided to cut the repo rate after 5 years. This will be a big relief for homebuyers.
Home loan EMI will be reduced.
All retail floating rate loans issued since October 1, 2019, are linked to an external benchmark. In most cases, this is the external benchmark repo rate. This means that changes in the repo rate will have a direct impact on the interest rates of such home loans. After the announcement of the repo rate cut on February 7, the interest rates on such home loans will come down. Banks will start reducing interest rates for their floating-rate home loan customers. This will reduce the EMI of your home loan.
Interest rates have fallen for five years.
Home loan customers have been waiting for a reduction in home loan EMIs for the past several years. In 2020, the RBI began the process of raising the repo rate. Since then, the repo rate has been increased 7 times to prevent inflation. The repo rate has been reduced from 4 percent to 6.5 percent. The RBI has decided to cut the repo rate to bring down inflation. This has brought it down from 6.5 percent to 6.25 percent.
This will reduce the EMI.
We can understand the benefits of reducing the repo rate with the help of an example. Suppose you had taken a home loan of 50 lakh rupees a year ago. The interest rate is 9%. Its duration is 240 months, which is 20 years. Your EMI will be around Rs 44,986. Thus, paying interest over a period of 20 years will cost you around Rs 58 lakh. A cut in the repo rate will lead to lower interest rates for home loan borrowers. This means that the interest rate will be reduced from 9 percent to 8.75 percent.
Benefits for new homebuyers
By reducing the interest rate to 8.75 percent, your total expenditure on interest will come down to 53.6 percent. In this way, your total savings will be Rs. 4.4 lakh. In addition, your loan period will be reduced to 230 months. This means that your loan will expire before 10 months. Experts say that people who are waiting for a reduction in interest rates to take a home loan can now get a loan at a lower interest rate. This will reduce their EMI from the beginning.
